The US national debt has reached a record high, reaching $34 trillion for the first time in history.
Facts A Treasury Department release Tuesday showed that outstanding federal borrowing rose to $34.001 trillion as of Dec. 29, just weeks ahead of Congress's deadlines for new federal financing plans.
The staggering figure, which is a major point of contention between Republicans and Democrats, is equivalent to $101,233 in federal debt for every person in America, according to the Peter G. Peterson Foundation.
The rising deficit means the US government is spending more than $1.8 billion a day on interest payments alone, the bipartisan group found, which it says threatens America's economic future.
Experts warn that higher debt levels could put upward pressure on inflation, keeping interest rates higher and raising the cost of borrowing for households. It could also affect major programs, including Social Security and Medicare.
The US national debt has reached a record high, reaching $34 trillion for the first time in history
Maya MacGuineas, chair of the Committee for a Responsible Federal Budget, a budget watchdog, said the debt level is “dangerous to both our economy and national security.”
In a rackshe called the record figure “a truly depressing 'achievement'.”
Lawmakers in Washington agreed last June to temporarily lift the country's debt limit to avoid a historic default.
Currently, lawmakers are facing deadlines for passing permanent department budgets this month and next, after the government agreed to an emergency law in November to prevent a shutdown.
Funding for four agencies and projects, including military construction and veterans affairs, is extended through Jan. 19, and funding for eight others runs through Feb. 2.
“We remain hopeful that policymakers will take further action to reduce our borrowing, whether by raising taxes, cutting spending or creating a budget committee – or ideally by doing all of the above,” MacGuineas added to.
The government's rising debt burden is a growing concern because higher interest rates mean it has become much more expensive to pay off debt.
In a rackthe Peter G. Peterson Foundation warned that if long-term budget problems are not addressed, “our nation will be at greater risk of economic crisis.”
It warned that this could mean the government will spend more of its budget on interest costs, increasingly crowding out public investment.
“At some point, investors may begin to doubt the government's ability to repay debt and demand even higher interest rates, further raising borrowing costs for businesses and households,” the report said.
“Over time, lower confidence and investment would slow growth in productivity and wages for American workers.”
If investors lose confidence in the country's fiscal position, it could reduce the value of government bonds, which include some pension funds.
If economic growth is threatened, 401(K) retirement investments would be affected.
Higher interest rates due to increased federal borrowing could also make it harder for families to buy homes, finance car payments or pay for college, the bipartisan group said.
Debt trends over the coming decades could also put even greater fiscal pressure on programs like Social Security, Medicare and Medicaid as costs continue to outweigh tax revenues.
Government dysfunction could also pose a financial risk as investors worry about lawmakers' willingness to repay U.S. debt.
An analysis by the Peter G. Peterson Foundation shows that foreign ownership of U.S. debt peaked at 49 percent in 2011, but had fallen to 30 percent by the end of 2022.
According to the Peter G. Peterson Foundation, the $34 trillion deficit is equivalent to $101,233 in federal debt for every person in America.
Emerson Sprick, deputy director of economic policy at the Bipartisan Policy Center, told DailyMail.com: “The low borrowing costs of the past fifteen years have likely dampened the economic impact of our rising debt, but now higher interest rates are increasing it. risks, especially considering that the federal debt is much higher.
'There are concerns that we will see consequences very soon at both the macroeconomic level and at the household level. These consequences would certainly have consequences for savers and investors.
“Spikes in interest rates, inflation and unemployment are all reasonable predictions and could all be associated with a significant market decline, with corresponding declines in retirement portfolios.”
He warned that this would particularly affect those who are already or nearing retirement, because starting to withdraw during a recession could accelerate the depletion of your savings and permanently reduce the growth potential of your portfolio in the future.
Rising debt and political divisions have taken their toll on America's credit rating.
Credit rating agency Fitch downgraded US debt from the highest rating of AAA to AA+ in August last year, citing “a steady deterioration in governance standards.”
And in November, agency Moody's warned it could remove the government's AAA rating while downgrading its outlook from stable to negative.
Officials pointed to higher interest rates and concerns about U.S. fiscal strength as part of the justification for the move.
White House spokesman Michael Kikukawa said the rising debt was caused by tax cuts passed by Republicans in 2017, which were “skewed toward big corporations and the wealthy.”
Kikukawa added that President Joe Biden plans to cut U.S. deficits by $2.5 trillion over 10 years by raising taxes on big corporations — including pharmaceutical and oil companies — and wealthy Americans.